EU and US launch talks on vast free trade

The European Union and the US have launched long-awaited formal negotiations on a vast trade pact.Source: AAP

THE European Union and the United States have launched long-awaited formal negotiations on a vast trade pact.

Speaking just before the start of the G8 summit in Lough Erne, Northern Ireland, British Prime Minister David Cameron said: "We are talking about what could be the biggest bilateral deal in history."

"This is a once-in-a-generation prize and we are determined to seize it."

US President Barack Obama said the first round of negotiations would take place in Washington next month.

The process seeking to create the world's biggest free-trade pact is expected to take up to two years, an ambitious target for such complex international talks.

Obama said the deal "will support hundreds of thousands of jobs on both sides of the ocean".

"There are going to be sensitivities on both sides ... but if we can look beyond the narrow concerns to stay focused on the big picture ... I'm hopeful we can achieve (a deal)."

The US president said reaching an agreement "will be a priority of mine and my administration".

If a Free Trade Agreement (FTA) can be reached it would be the world's largest: trade in goods between the US and the 27-country EU last year was worth some 500 billion euros ($A703.26 billion), with another 280 billion euros in services and trillions in investment flows.

The EU says establishing a Free Trade Agreement would add about 119 billion euros annually to the EU economy, and 95 billion euros for the United States.

The head of the EU executive, Jose Manuel Barroso, speaking at the same media conference, said a deal could create "huge economic benefits".

"These negotiations will not always be easy but I am sure they will be worth it," Barroso said.

"The current economic climate requires us to join forces and to do more with less."

Negotiations will start despite a hard line by France to protect its cherished film and culture sectors from Hollywood, which is seen as potentially offering a bargaining chip to the US side.

A compromise was only struck in tense talks in Luxembourg on Friday.

France insisted that the audiovisual sector be excluded from the negotiations and after 13 hours of talks, a compromise was reached agreeing to Paris' demand while stating that the European Commission could come back on the question if necessary.

EU officials have repeatedly warned that excluding any economic sector could hand the US an early bargaining chip in what promise to be tough negotiations.

Washington says no areas should be excluded from the talks although there have been reports that it may seek an exception for some financial services.

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